Do you want to start driving school business?

Are you thinking about starting a driving school? The biggest advantage of starting this business is that you can start it with lower initial investments as compared to other businesses and can make it extremely profitable, provided that you plan and execute it successfully. But there are a lot of things which need to be considered before starting this venture.
The first thing is how to secure the license and permits for starting a driving school. In addition to that, you should also consider whether you will purchase the required cars or procure them on the lease. So, the first step you should take is to develop a comprehensive business plan covering all aspects of your business.
The business plan will not only help you in startup but will also form the basis of your company’s future policies. So, for assisting you with writing an effective business plan, here we are providing the business plan for a driving school business startup named ‘Star Driving School’.

Executive Summary

2.1 The Business

Star Driving School will be a licensed and insured driving school in Manhattan that will mainly provide private and commercial driving education to its customers along with other related services.
The business will be owned by Mark Gill. Mark is an MBA from Harvard and has served in various managerial positions at various driving schools in the United States that’s why he knows everything about how to open a driving school.

2.2 Management

The company will hire a staff comprising of trainers, assistants and sales executives, all of which will be trained for one month prior to onboarding.

2.3 Customers

Star Driving School will be a licensed driving school where we will offer driving classes for people belonging to all age-groups along with specialized classes for professional drivers.

2.4 Target of the Company

The business targets are to balance the cost of a startup within the next year of launch and to become the best driving school in Manhattan. Our sales and revenue targets for next three years are summarized in the chart below:

Driving School Business Plan - 3 Years Profit Forecast

Company Summary

3.1 Company Owner

Star Driving School will be owned by Mark Gill. Mark is an MBA from Harvard and has served in various managerial positions at various driving schools in the United States.

3.2 Why the Business is being started

Mark has an entrepreneurial mind and by starting a driving school business he aims to make profits in this industry.

3.3 How the Business will be started

Star Driving School will be located at a ten minutes’ drive from the main residential district of Manhattan. In addition to the usual inventory, the company will initially procure 10 cars with varying engine capacities, 3 minibusses, and 2 medium-sized commercial trucks. All vehicles will be procured on lease for a duration of 5 years after which the leasing contract will be renewed.
The costs for startup are as follows:

Driving School Business Plan - Startup cost

The startup requirements are as follows:

Start-up Expenses 
Legal$75,500
Consultants$0
Insurance$62,750
Rent$22,500
Research and Development$42,750
Expensed Equipment$42,750
Signs$1,250
TOTAL START-UP EXPENSES$247,500
Start-up Assets$0
Cash Required$322,500
Start-up Inventory$52,625
Other Current Assets$222,500
Long-term Assets$125,000
TOTAL ASSETS$121,875
Total Requirements$245,000
START-UP FUNDING$0
START-UP FUNDING$273,125
Start-up Expenses to Fund$121,875
Start-up Assets to Fund$195,000
TOTAL FUNDING REQUIRED$0
Assets$203,125
Non-cash Assets from Start-up$118,750
Cash Requirements from Start-up$0
Additional Cash Raised$118,750
Cash Balance on Starting Date$121,875
TOTAL ASSETS$0
Liabilities and Capital$0
Liabilities$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
TOTAL LIABILITIES$0
Capital$0
Planned Investment$0
Investor 1$312,500
Investor 2$0
Other$0
Additional Investment Requirement$0
TOTAL PLANNED INVESTMENT$695,000
Loss at Start-up (Start-up Expenses)$313,125
TOTAL CAPITAL$221,875
TOTAL CAPITAL AND LIABILITIES$221,875
Total Funding$265,000

Services for customers

Before you open a driving school business, you must decide on what services will you provide to your future customers. It will also help you to acquire permits and license from the local governing bodies.
Star Driving School will be a licensed and insured driving school in Manhattan that will mainly provide private and commercial driving education to its customers along with other related services. Our main services include:

  • Driving classes for all individuals aspiring to learn car driving
  • Special driving classes for professional drivers aspiring to learn bus and truck driving
  • Short driving refresher courses
  • Advisory and consultancy services for helping students acquire driving licenses and car documents

Marketing Analysis of driving school business

The most important component of a driving school business plan is its accurate marketing analysis because it decides whether a startup in this industry will become a success or end in failure. That’s why an accurate marketing analysis must be carried out before developing the business plan driving school.
If you have no idea about how to start a drivers Ed school you can take help from this sample template. But if you are starting on a large scale then it is better to seek the help of marketing experts. A successful marketing analysis will tell you which region or area will be most suitable to open driving school and will also help you later in the estimation of driving school start up cost.

5.1 Marketing Trends

There are more than 8,000 driving education businesses associated with the Driving Schools Association of the Americas. Out of these 8,000 institutes, there are 6,000 professional driving schools. The number of driving education institutes has constantly increased over the recent years and is expected to increase at the same rate for the next few years. Considering these stats, we can establish that any business in this industry can become extremely profitable provided that you plan it successfully.

5.2 Marketing Segmentation

Our target market is the residential community living nearby at the 10 minutes’ drive from our office. The community consists of all types of people from varying backgrounds. There are currently more than 738,000 households in Manhattan out of which 17.1% have children under the age of 18 living with them, 25.2% are married couples living together and 10.9% are persons with 65 years of age or older. Our experts have identified following target groups for our services:

Driving School Business Plan - Market Segmentation

The detailed marketing segmentation of our target audience is as follows:

5.2.1 Beginners:

The first group of our customers comprises of those teenagers who just turned 18 years of their ages and want to learn how to drive. These beginners are mostly high school students.

5.2.2 Learners:

The second category includes those people who are in the possession of a vehicle and need a license to hit the road. These learners will be subjected to proper driving training and will also be helped with acquisition of driving licenses and car documents.

5.2.3 Professionals:

The last category includes commercial drivers or those people who want to pursue a career in driving by learning bus or truck driving. This group will be subjected to vigorous training and special road safety education.
The detailed market analysis of our potential customers is given in the following table:

Market Analysis
Potential CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Learners48%22,33432,34443,66552,54466,43210.00%
Beginners18%11,43313,34416,55318,74520,54513.43%
Professionals34%18,32219,45520,65522,86724,43315.32%
Total100%52,08965,14380,87394,156111,4109.54%

5.3 Business Target

Our business targets are:

  • To become the best driving school in Manhattan within next 5 years
  • To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
  • To balance the initial cost of the startup with earned profits by the end of the first year

5.4 Product Pricing

Product pricing is also one of the main deciding factors in the success of a startup that’s why we have priced our services in slightly lower ranges (10% less) as that of the prices offered by our competitors.

Strategy

Like marketing analysis, sales strategy is also an important component of any business plan so it must be thought through before you think about how to open a driving school business.

6.1 Competitive Analysis

There are thousands of established driving schools in the United States and it is not easy to survive and excel in such competitive environment. That’s why you need to come up with something different before you start a driving school business. Our competitive advantage lies in the power and dedication of our team. We have the best team of experienced trainers who are willing to go to any limit for ensuring customer satisfaction. On top of that, our prices are very reasonable and comparatively lower than the most of our competitors, thus giving us a clear advantage over other competitors.

6.2 Sales Strategy

We will attract our customers towards us through various efforts, such as:

  • We will advertise our driving school in magazines, newspapers and social media
  • We will offer discounts on the membership for the first three months of the launch
  • We will arrange seminars and awareness sessions on the importance of road safety in various educational institutions which will also promote our company

6.3 Sales Forecast

Our sales are forecasted in the following column charts:

Driving School Business Plan - Unit Sales

The detailed information about sales forecast is given in the following table:

Sales Forecast   
Unit SalesYear 1Year 2Year 3
Normal driving training187,330260,320258,240
Professional driving training802,370815,430823,540
Refresher courses539,3207702301,002,310
Advisory & consultancy services265,450322,390393,320
TOTAL UNIT SALES1,794,4702,168,3702,477,410
Unit PricesYear 1Year 2Year 3
Normal driving training$140.00$150.00$160.00
Professional driving training$600.00$800.00$1,000.00
Refresher courses$700.00$800.00$900.00
Advisory & consultancy services$650.00$750.00$850.00
Sales
Normal driving training$214,800$274,000$333,200
Professional driving training$120,050$194,500$268,500
Refresher courses$50,110$71,600$93,000
Advisory & consultancy services$139,350$194,600$249,850
TOTAL SALES
Direct Unit CostsYear 1Year 2Year 3
Normal driving training$0.70$0.80$0.90
Professional driving training$0.40$0.45$0.50
Refresher courses$0.30$0.35$0.40
Advisory & consultancy services$3.00$3.50$4.00
Direct Cost of Sales
Normal driving training$98,300$183,000$267,700
Professional driving training$66,600$119,900$173,200
Refresher courses$17,900$35,000$52,100
Advisory & consultancy services$19,400$67,600$115,800
Subtotal Direct Cost of Sales$294,100$699,400$1,104,700

6.4 Sales Monthly

Driving School Business Plan - Sales Monthly

6.5 Sales Yearly

Driving School Business Plan - Sales Yearly

Personnel plan

Personnel plan is also an important component of a business plan, so make sure to develop it before thinking about how to start a driving school business.

7.1 Company Staff

The company will initially hire the following staff:

  • 1 General Manager for managing the overall operations
  • 2 Administrators/Accountants for maintaining financial records
  • 4 Sales Executives responsible for marketing and discovering new ventures
  • 10 Trainers for providing driving training to members
  • 2 Assistants for undertaking day-to-day tasks
  • 1 Front Desk Officer for acting as a receptionist

7.2 Average Salary of Employees

 Personnel Plan   
Year 1Year 2Year 3
General Manager$42,000$59,000$76,000
Accountants$85,000$95,000$105,000
Sales Executives$85,000$92,000$109,000
Trainers$135,000$155,000$185,000
Assistants$60,000$63,300$70,000
Front Desk Officer$35,000$42,000$59,000
Total Salaries$343,300$380,300$440,700

Financial Plan

The last thing to do before thinking about how to start your own driving school is to develop a financial plan outlining the development of your company over the next few years. The financial plan of Star Driving School is as follows.

8.1 Important Assumptions

 General Assumptions   
Year 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%
Other000

8.2 Brake-even Analysis

Driving School Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even5530
Monthly Revenue Break-even$159,740
Assumptions:
Average Per-Unit Revenue$260.87
Average Per-Unit Variable Cost$0.89
Estimated Monthly Fixed Cost$196,410

8.3 Projected Profit and Loss

 Pro Forma Profit And Loss   
Year 1Year 2Year 3
Sales$309,069$385,934$462,799
Direct Cost of Sales$15,100$19,153$23,206
Other$0$0$0
TOTAL COST OF SALES$15,100 $19,153 $23,206
Gross Margin$293,969$366,781$439,593
Gross Margin %94.98%94.72%94.46%
Expenses
Payroll$138,036$162,898$187,760
Sales and Marketing and Other Expenses$1,850$2,000$2,150
Depreciation$2,070$2,070$2,070
Leased Equipment$0$0$0
Utilities$4,000$4,250$4,500
Insurance$1,800$1,800$1,800
Rent$6,500$7,000$7,500
Payroll Taxes$34,510$40,726$46,942
Other$0$0$0
Total Operating Expenses$188,766$220,744$252,722
Profit Before Interest and Taxes$105,205$146,040$186,875
EBITDA$107,275$148,110$188,945
Interest Expense$0$0$0
Taxes Incurred$26,838$37,315$47,792
Net Profit$78,367$108,725$139,083
Net Profit/Sales30.00%39.32%48.64%

8.3.1 Profit Monthly

Driving School Business Plan - PROFIT MONTHLY

8.3.2 Profit Yearly

Driving School Business Plan - PROFIT YEARLY

8.3.3 Gross Margin Monthly

Driving School Business Plan - GROSS MARGIN MONTHLY

8.3.4 Gross Margin Yearly

Driving School Business Plan - GROSS MARGIN YEARLY

8.4 Projected Cash Flow

Driving School Business Plan - Projected Cash Flow Diagram

 Pro Forma Cash Flow   
Cash ReceivedYear 1Year 2Year 3
Cash from Operations
Cash Sales$40,124$45,046$50,068
Cash from Receivables$7,023$8,610$9,297
SUBTOTAL CASH FROM OPERATIONS$47,143 $53,651 $59,359
Additional Cash Received
Sales Tax, VAT, HST/GST Received$0$0$0
New Current Borrowing$0$0$0
New Other Liabilities (interest-free)$0$0$0
New Long-term Liabilities$0$0$0
Sales of Other Current Assets$0$0$0
Sales of Long-term Assets$0$0$0
New Investment Received$0$0$0
SUBTOTAL CASH RECEIVED$47,143 $53,651 $55,359
ExpendituresYear 1Year 2Year 3
Expenditures from Operations
Cash Spending$21,647$24,204$26,951
Bill Payments$13,539$15,385$170,631
SUBTOTAL SPENT ON OPERATIONS$35,296 $39,549 $43,582
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out$0$0$0
Principal Repayment of Current Borrowing$0$0$0
Other Liabilities Principal Repayment$0$0$0
Long-term Liabilities Principal Repayment$0$0$0
Purchase Other Current Assets$0$0$0
Purchase Long-term Assets$0$0$0
Dividends$0$0$0
SUBTOTAL CASH SPENT$35,296 $35,489 $43,882
Net Cash Flow$11,551$13,167$15,683
Cash Balance$21,823$22,381$28,239

8.5 Projected Balance Sheet

 Pro Forma Balance Sheet   
AssetsYear 1Year 2Year 3
Current Assets
Cash$184,666$218,525$252,384
Accounts Receivable$12,613$14,493$16,373
Inventory$2,980$3,450$3,920
Other Current Assets$1,000$1,000$1,000
TOTAL CURRENT ASSETS$201,259 $237,468 $273,677
Long-term Assets
Long-term Assets$10,000$10,000$10,000
Accumulated Depreciation$12,420$14,490$16,560
TOTAL LONG-TERM ASSETS$980 $610 $240
TOTAL ASSETS$198,839 $232,978 $267,117
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$9,482$10,792$12,102
Current Borrowing$0$0$0
Other Current Liabilities$0$0$0
SUBTOTAL CURRENT LIABILITIES$9,482 $10,792 $12,102
Long-term Liabilities$0$0$0
TOTAL LIABILITIES$9,482 $10,792 $12,102
Paid-in Capital$30,000$30,000$30,000
Retained Earnings$48,651$72,636$96,621
Earnings$100,709$119,555$138,401
TOTAL CAPITAL$189,360 $222,190 $255,020
TOTAL LIABILITIES AND CAPITAL$198,839 $232,978 $267,117
Net Worth$182,060$226,240$270,420

8.6 Business Ratios

 Ratio Analysis    
Year 1Year 2Year 3Industry Profile
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets
Accounts Receivable5.61%4.71%3.81%9.70%
Inventory1.85%1.82%1.79%9.80%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Current25.8629.3932.921.63
Quick25.428.8832.360.84
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.